Regulation
What is the Alternative End of Service Benefits Scheme in the UAE?
Published 3 August 2026 · Last reviewed 8 September 2026 · 5 min read
The Alternative End of Service Benefits Scheme, usually called the Savings Scheme, is a voluntary UAE federal system that lets private sector employers pay monthly contributions into an approved investment fund instead of accruing a lump-sum gratuity liability. It was introduced under Cabinet Resolution No. 96 of 2023 and is administered by the Ministry of Human Resources and Emiratisation (MoHRE) together with the Capital Markets Authority (CMA, formerly the Securities and Commodities Authority).
The problem the Savings Scheme was built to solve
Under the traditional system set out in Federal Decree-Law No. 33 of 2021, an employee's end-of-service gratuity accrues at 21 days of basic wage for each of the first five years of service and 30 days for each year after that, capped at two years' total wage. The employer holds that obligation on its own balance sheet and settles it in cash when the employee leaves.
Three things follow from that structure. The employee's entitlement is unfunded, so it depends on the employer still being solvent years later. It earns nothing, so inflation erodes it across a long tenure. And the employer carries a liability that grows quietly with headcount and wage inflation, often without a matching pool of assets.
The Savings Scheme changes all three. Contributions leave the employer's balance sheet each month, sit in a ring-fenced fund the employer cannot touch, and are invested.
Who can participate in the UAE Savings Scheme
Participation is open to private sector employers under MoHRE jurisdiction, including companies in most free zones. Two jurisdictions are excluded because they run their own systems: the Dubai International Financial Centre, where the mandatory DEWS plan applies, and the Abu Dhabi Global Market, which operates its own voluntary arrangements.
UAE nationals are not covered by the Savings Scheme. Their end-of-service entitlements continue under the pensions and social security legislation administered through GPSSA.
Employers are not required to enrol everybody. You may enrol the whole workforce, a specific group, or selected professional categories. But the choice is the employer's, not the employee's: once an employer selects an employee for the scheme, participation is mandatory for that person.
How Savings Scheme contributions work
The basic contribution mirrors the gratuity accrual rate it replaces, calculated on the employee's basic monthly salary:
| Length of continuous service | Basic monthly contribution |
|---|---|
| Less than 5 years | 5.83% of basic salary |
| 5 years or more | 8.33% of basic salary |
Those percentages are not arbitrary. 5.83% of monthly basic salary compounds to roughly 21 days of pay per year, and 8.33% to roughly 30 days, the same accrual the statutory formula produces. The scheme is designed to change how the benefit is funded, not how much it is worth.
Employees may also make voluntary contributions of up to 25% of their annual salary on top of the employer's basic contribution. Those voluntary amounts are the employee's own money and follow different access rules from the employer-funded portion.
Employers transfer contributions to the fund within 15 days of the start of each calendar month.
What happens to gratuity already accrued
This is the most commonly misunderstood part of the scheme, and getting it wrong creates a real liability.
The scheme is not retroactive. Any gratuity accrued under the traditional system before the enrolment date remains a debt of the employer. It must be calculated and recorded as at the enrolment date, preserved, and settled when the employee eventually leaves. Enrolling in the Savings Scheme does not extinguish it.
In practice this means an employer running the scheme is managing two things at once: a frozen legacy gratuity balance per employee, and a live funded pot. Any system that cannot hold both separately will produce the wrong number at termination.
Investment options under the scheme
Funds approved under the scheme must offer a defined range of options:
- A capital guarantee portfolio, a risk-free option that protects the contributed capital. This is the required option for unskilled workers.
- Risk-based portfolios across a range of expected return and volatility.
- Sharia-compliant funds.
Fund providers are licensed and supervised by the CMA and approved by MoHRE. The CMA handles complaints about fund provider performance. In the financial free zones, the relevant free zone authority supervises its own equivalent arrangements.
What the employee receives
On termination, the employee is entitled to all basic subscription amounts paid by the employer, plus any investment returns earned on them, within 14 days of the employment relationship ending. Voluntary contributions and their returns belong to the employee throughout.
If the employee moves to another participating employer, the new employer can contract with the same fund and continue the subscription, so the pot follows the employee rather than being closed and reopened.
Because the assets sit in a regulated fund rather than on the employer's books, employer insolvency does not put the accumulated balance at risk. That protection is the scheme's central promise to the employee.
What employers should think about before enrolling
Cash flow timing changes. You move from an accrued, deferred obligation to a real monthly cash outflow. For a business with long-tenured staff and a large unfunded balance, this is a genuine change to working capital, even though the total cost is unchanged.
Accounting treatment changes. The liability profile under IAS 19 looks materially different once contributions are funded and paid across. Involve your auditors before enrolment, not after.
The legacy balance needs somewhere to live. As above, the pre-enrolment accrual does not disappear, and it needs to be tracked per employee for what may be many years.
Selection creates fairness questions. Enrolling one group and not another is permitted, but it is visible to your workforce and worth being able to explain.
Administration is monthly, not annual. Contribution files, joiner and leaver events, salary changes, and reconciliation against the fund all become a recurring operational cycle. This is where most of the hidden cost sits, and it is the part of the scheme that Cohlay's platform is built to run for fund managers and the employers they serve.
Where the policy is heading
MoHRE invited public comment on the Savings Scheme framework through the federal sharik.ae platform in early 2026. Market commentary has widely anticipated that a voluntary scheme is a step toward a mandatory one, though nothing has been enacted to that effect. Employers deciding today should weigh the possibility that the operational build they do now becomes a requirement later.
Frequently asked questions
- Is the UAE Savings Scheme mandatory?
- No. It is voluntary for the employer. However, once an employer enrols a given employee, participation is mandatory for that employee.
- Does the Savings Scheme apply in DIFC?
- No. DIFC employers fall under the mandatory DEWS plan instead. ADGM operates its own arrangements.
- Does it apply to UAE nationals?
- No. End-of-service entitlements for UAE nationals in the private sector follow the pensions and social security legislation rather than this scheme.
- Does enrolling wipe out gratuity already earned?
- No. Gratuity accrued before the enrolment date is preserved and remains payable by the employer at termination.
- How much does the employer contribute?
- 5.83% of basic monthly salary for employees with less than five years of continuous service, and 8.33% thereafter.
- Can employees add their own money?
- Yes, up to 25% of annual salary as voluntary contributions.
- How quickly is the employee paid at the end?
- Within 14 days of the employment relationship terminating.